Lower Prices & Encourage Innovation



How do we protect innovation but drive down medical costs?

This was the topic of discussion at the U.S. House hearing on drug pricing on February 12, 2019. The hearing opened with a testimony from Odunola (Ola) Ojewumi, a 24 year old patient who has undergone several transplants, suffered from cancer, and has to take 22 pills a day simply to stay alive. Even with great insurance, she still pays around $3000 a year in co-pays, and this doesn’t include other medications that she can’t afford.

This story pulled at the heartstrings of everyone in the House, and even though there are thousands of stories like Ola’s, receiving proper medical treatment is still out of reach for most Americans because of the high costs. Everyone at this hearing agreed that there needs to be a reduction in drug costs, but the right way to lower these drug prices remains unanswered. Several of the expert witnesses offered solutions such as comparing U.S. prices against the international price index, intervening on drug monopolies, using pay-for-delay, negotiating prices, and bolstering competitions with generics and biosimilar drugs.

Many of these potential solutions, however, could halt innovation. If the government intervenes on monopolies, drug makers would not have the same incentive to create new drugs because they would not have the same monopoly over a drug. The real tension at this hearing was how do we lower prices, align incentives with the patient, but continue to encourage innovation.


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